Whistl UK Ltd (formerly TNT Post UK Ltd), R (on the application of) v HM Revenue and Customs

Neutral Citation Number: [2014] EWHC 4118 (Admin) IN THE HIGH COURT OF JUSTICE QUEEN’S BENCH DIVISION ADMINISTRATIVE COURT Case No: CO/2860/2006 Case No: CO/5302/2011 Royal Courts of Justice Strand, London, WC2A 2LL Date: 08/12/2014 Before : THE HONOURABLE Mr. JUSTICE KENNETH PARKER - - - - - - - - - - - - - - - - - - - - Between : THE QUEEN on the application of WHISTL UK LIMITED (formerly TNT POST UK LIMITED) - and - HER MAJESTY'S REVENUE AND CUSTOMS -and- ROYAL MAIL GROUP LIMITED - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Claimant Defendant Interested party Ms Penny Hamilton and Mr Thomas Chacko (instructed by Charles Russell Solicitors) for the Claimant Ms Jessica Simor and Ms Sarah Hannett (instructed by HMRC Solicitors Office) for the Defendant Mr Javan Herberg QC and Ms Emily Neill (instructed by Slaughter and May Solicitors) for the Interested Party Hearing dates: 1 to 3 April - - - - - - - - - - - - - - - - - - - - - Judgment The Honourable Mr Justice Kenneth Parker : Introduction 1. 2. 3. 4. 5. 6. This short judgment deals with a number of matters arising from the final judgment that I handed down on 23 October 2014. I am grateful for the written submissions from the parties on those outstanding matters. Permission to Appeal I have considered TNT Post’s submissions on permission to appeal. It seems to me, with respect to Ms Hamilton, that they echo the arguments that were made in the claim. I addressed each of the arguments in the final judgment and explained at some length the reasons for rejecting them. It would serve no useful purpose to travel again over that ground. I have to form a view as to whether there would be a real prospect of success on appeal or some other reason for granting permission. I do not believe that there is such a prospect or reason, and TNT Post must therefore persuade the Court of Appeal that permission should be granted. Costs Generally TNT Post invites me to stay proceedings in respect of costs. However, I have disposed of the claims and I should rule upon costs, even if, as TNT Post contends, the final outcome might be different if it were to obtain permission to appeal and were to succeed, in whole or in part, on the appeal. That is a possibility that frequently arises, but it is not generally a good reason for delaying the resolution of any question of costs. The parties are entitled to know where they stand in respect of any cost recovery or liability in the light of the judgment. If the judgment were disturbed, any order for costs would need to be revisited and adjusted to take account of the final outcome, but I do not foresee any special difficulty in that course. Costs: CO/5302/2011 TNT Post accepts that, in principle, it is liable to pay the costs of HMRC in defending this claim. However, TNT Post contends that a central argument advanced by HMRC for the substantive hearing did not succeed and that there should be a ‘significant restriction’ on any award of costs in favour of HMRC. I do not accept that this is a case were it would be appropriate to make an issues-based order for costs (Johnsey Estates (1990) Ltd v Secretary of State for the Environment [2001] EWCA Civ 535 at [21] and [29]). HMRC did not lose on any discrete issue: it simply advanced an argument that I did not find convincing. However, the argument was a central one and, TNT Post clearly had to deal with that argument. On the other hand HMRC had to deal with very substantial arguments regarding fiscal neutrality and competition which, in my view, were largely irrelevant. Taking account of that countervailing factor I do not believe that it would be right to disallow any part of HMRC’s costs. Those costs should, however, exclude HMRC’s costs in respect of appearing at the permission hearing. This is not a case where such costs would have been awarded under the principles established in R(Mount Cook Land Ltd) v Westminster City 7. 8. 9. 10. 11. 12. Council [2004] 2 P&CR 405 at [76]. I accept that having dismissed the substantive claim globally, I have to consider the matter in the round. But, on a strict view, HMRC did not need to attend the permission hearing and it would be disproportionate to impose further costs on TNT Post, especially as it did succeed on permission. RMG applies for its costs as the Interested Party. The parties address this question at considerable length with reference to copious authority. In Bolton Metropolitan District Council v Secretary of State for the Environment [1995] 1 WLR 1176, Lord Lloyd stated that an interested party ‘will not normally be entitled to his costs unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the [Defendant]; or unless he has an interest which requires separate representation’ (at 1178). RMG contends that there was a distinction between the interest of HMRC and the interest of RMG. That is obviously true in the sense that HMRC is a proxy for the UK which has a duty under EU law correctly to implement the VAT exemption in domestic law. RMG has a clear economic interest in ensuring that the VAT exemption is not narrowed in a way that would be inconsistent with EU law. However, in this case there was no tension at all between the respective positions of HMRC and RMG. On the contrary, there was a common interest in seeking to uphold the UK’s implementation of the VAT Directive. I accept that the challenged exemption is of great importance to RMG. In claim CO/2860/2006 TNT Post attacked RMG’s exclusive entitlement to the VAT exemption. In Claim CO/5302/2011 TNT Post challenged the application of the VAT exemption to RMG’s access service. If TNT Post had succeeded, RMG’s revenues would have been at serious risk of reduction, and prices might have had to increase. The challenge was also brought for commercial reasons. RMG additionally in its costs submission set out extensively the contribution that it made to the proceedings, in particular, in CO/5302/2011, where HMRC in effect delegated to RMG the task of assembling a very considerable volume of factual evidence and regulatory material. There is no doubt that RMG performed an impressive task in that respect, and I believe that through its efforts the Court had a firm understanding of the factual and regulatory background to the legal issues. However, TNT Post make what seem to me two fair points on that aspect. First, the resolution of the legal issues turned ultimately on the legal framework in the UK for the supply of postal services. Secondly, it would have been reasonably open to RMG to provide the additional material to HMRC without a compelling need to participate actively in the proceedings, particularly given that RMG was for most of those proceedings in the public sector and that RMG was very expertly and skilfully advised, both by solicitors and counsel, as to what further material would be likely to assist HMRC in its defence to the claims. 13. This is a finely balanced case as to whether RMG should be awarded the costs of its intervention. In the end I have concluded that a public policy dimension narrowly sways the decision against RMG. In both claims TNT Post contended that the UK 14. 15. 16. had failed lawfully to implement EU fiscal law. If such a claim is brought, it should ordinarily be expected that HMRC, as the proxy for the UK in the fiscal field, will defend the claim and will have the requisite legal expertise and understanding of the facts to do so. It should not ordinarily be contemplated that individual actual or potential taxpayers, even those as large and potentially affected as RMG, are required to support HMRC in its defence. The prospect of such intervention, and the consequential risk of having to bear what may well be the heavy costs of such intervention, could act as a real deterrent to challenges of this nature, and could thus inhibit an important instrument for promoting the lawful implementation and application of EU law. I say ‘ordinarily’ advisedly, because there could well be fiscal or similar cases where the factors in favour of an award of costs to an intervening party may nonetheless be sufficiently powerful to justify that result. As I have said, this was a finely balanced decision, and I fully recognise the force of the points made by RMG. However, it is this last dimension of public policy that leads me to reject RMG’s application. Costs: CO/2860/2006 I regret to say that this is also far from straightforward. Both HMRC and TNT Post claim victory in CO/2860/2006 or, alternatively, that each should receive a proportionate part of its costs reflecting the extent to which it had been successful. On the latter basis TNT Post claims at least 70 per cent of its costs; and HMRC claims about 95 per cent of its costs. The problem arises from the manner in which TNT Post presented its attack in the ECJ and the manner in which the UK responded. Both parties adopted extreme positions. TNT Post argued that with liberalisation of the market and the abolition of reserved services, the basis for the VAT exemption in the UK had simply disappeared: all postal services would then have been standard rated. Alternatively, all postal services would have been exempt. HMRC argued that all services supplied by RMG as universal service provider were exempt, but no services supplied by other operators such as TNT Post qualified. As I stated in the judgment, TNT Post’s claim, looked at more broadly, was that the UK’s implementation of the EU VAT exemption was too extensive and thus unlawful. Looked at in that very broad way, the claim succeeded, and TNT Post would, in principle, be entitled to its costs. However, it seems to me that this is a case where the Court does need to consider, in determining the extent to which a successful party should recover its costs, the real nature of the successful party’s case. TNT Post’s case was fundamentally misconceived. The liberalisation of the market and the abolition of reserved services had no bearing whatsoever on the scope or continuing applicability of the EU VAT exemption. The UK was correct in insisting before the ECJ that the EU VAT exemption continued to be effective in the UK. Furthermore, there was no basis for TNT Post’s alternative case. As the UK again correctly argued, the EU VAT exemption was restricted, and continued to be restricted, only to postal operators who were universal service providers, albeit the UK went too far in contending that the exemption extended to all services provided by such operators. TNT Post simply failed in the real objective which had inspired its claim against the UK, namely, to put itself in the same VAT position as that enjoyed by RMG, whether that be a shared position in supplying VAT-exempt or standard rated services. 17. I am disinclined to seek to quantify the precise extent, in terms of volume or revenue, to which TNT Post, although wholly misconceived in its legal arguments and failing in its real objective, somewhat fortuitously scored a victory of sorts in the ECJ. Looking at the question in a broad and proportionate manner, I conclude that TNT Post should have 30 per cent of its costs of the claim. That order affects only HMRC. 18. TNT Post accepts that it is liable to pay HMRC’s costs occasioned by the unsuccessful application to amend C0/2860/2006.